UAE could become a blockchain superpower

The perception of digital assets by investors has changed significantly. Once viewed skeptically, digital assets – and blockchain, the technology on which they are based – have cemented their place in the financial mainstream, with a number of crypto companies such as Coinbase going public, and some of the managers of largest assets in the world developing crypto. services.

It has been 13 years since cryptocurrencies first entered the public consciousness, in the form of the Bitcoin white paper. This period has seen a lot of innovation, including the creation of an entire decentralized finance industry, the rapid rise of tokenized assets in the form of non-fungible tokens, or NFTs, and a blockchain-powered virtual reality web experience in the form of the metaverse.

Today, the digital asset industry is at a turning point. Barriers that once hindered the engagement and adoption of digital assets and blockchain have been eroded. The availability of mature institutional-grade infrastructure and regulated counterparties in the industry offers a secure and reliable means for stakeholders to access the digital asset sector.

The UAE has expertly positioned itself as a leader in the next wave of technological transformation.

Regulation was the last hurdle. Companies, institutions and investors need clarity to operate in the space and countries with clear legislative frameworks on digital assets have already established themselves as leaders in attracting such activity. Switzerland continues to maintain its financial pedigree by establishing itself as the de facto European crypto capital, having enacted a law allowing a wide range of crypto and blockchain-based business activities. It has also cultivated an ecosystem of more than a thousand blockchain companies, including 14 unicorns.

Europe as a whole has also made progress, with the EU Crypto Asset Market framework well into the legislative process. In Singapore, the Payment services law provides clear guidance for crypto companies to apply for a license to establish operations in the country. Even the US, once a notable laggard in digital assets, has announced that it will provide clear regulation on how banks can use cryptocurrencies in the coming months.

The demand for digital asset services has accelerated the pace of progress among many regulators. However, it is those jurisdictions that move early in regulation and provide a supportive environment for blockchain companies to operate that are most likely to reap the benefits. Economic power is increasingly based on the development of technology and jurisdictions that can harness the power of blockchain, as the next iteration of foundational technology may well supplant existing global technology centers of gravity.

The United Arab Emirates, a country that has developed a comprehensive regulatory framework for blockchain and digital assets, is one such example that is ready to capitalize on this opportunity. The UAE has a number of characteristics that position it as an ideal global hub for the blockchain and digital asset industry. It is ideally positioned in terms of existing business networks to take advantage of connectivity between the Middle East, North Africa, India and the West. Its role as a regional financial center may also allow the digital asset sector to flourish in the country.

The second largest economy in the Middle East, the United Arab Emirates has a clearly defined strategy to establish itself as a global leader in blockchain, which prioritizes both bringing crypto investment to the UAE and fostering indigenous engagement and innovation in blockchain.

The country has shown remarkable success in implementing blockchain as a foundational technology in all public services, with an estimated annual savings of AED11 billion in transaction and document processing by doing so. For example, the Dubai Police Department has issued thousands of lost passport certificates using a blockchain-based platform connected between public sector agencies. The Ministry of Health and Prevention, for its part, has launched one of the first national blockchain platforms for the secure storage of medical data.

To complement this strategy, the country has developed a comprehensive regulatory framework for digital assets in its two most populous emirates, Abu Dhabi and Dubai, to cultivate investment in digital assets on its shores. In 2018, the Abu Dhabi Global Market Financial Services Regulatory Authority established a virtual asset framework for digital asset trading by businesses, including exchanges, custodians, and brokers. Abu Dhabi is focused on providing the industry with a sandbox where they can test their products in a live environment to ensure they meet the UAE’s strict Anti-Money Laundering and Know Your Customer compliance standards.

Like its fellow crypto hub in Southeast Asia, license applications have been in high demand, with only a select few companies meeting the rigorous regulatory standards required to operate in the country. The country has struck the right balance between encouraging crypto businesses and investment, while ensuring that only the most innovative, compliant and secure operators set up shop on its shores.

Three regulated digital asset exchanges have already been established in the state, with applications for licenses that are expected to be granted for a number of other carriers earlier this year. The scale of Abu Dhabi’s vision for a blockchain-powered future goes far beyond regulation. Mubadala, one of the largest sovereign wealth funds in the world with more than $243 billion in assets under management, is actively investing in suitable companies in the blockchain industry. This holistic approach to the industry is likely to pay dividends for the emirate as it cements its place as a blockchain hub.

It is clear that the UAE has expertly positioned itself as a leader in the next wave of technological transformation. His strategy presents a useful model for other countries to follow, and may point to the dangers of falling behind for those that do not regulate and innovate fast enough.

Guido Buehler is the CEO of Seba Bank, a Swiss digital asset banking platform.

Published: February 28, 2022, 8:00 am